DIAL Can’t Levy Demurrage Charges From Customs Cargo Service Provider: Delhi HC [Read Judgment]

The Delhi High Court in Delhi International Airport Private Ltd. (DIAL) vs. Union of India Department Of Revenue, Ministry Of Finance And Ors., has held that DIAL cannot levy demurrage charges as per a regulation of the Customs Areas Regulations, 2009.

DIAL in its petition submitted that the said regulation 6(1)(1) of the Handling of Cargo in Customs Areas Regulations, 2009 (“cargo regulations”) was ultra-vires the provisions of Customs Act, 1962, and, furthermore, raised the grounds of arbitrariness and unconstitutionality (and thus violative of Articles 14 and 19 (1)(g) of the Constitution of India.

After an agreement for maintenance and development was signed between Airports Authority of India (AAI) and DIAL on 4^th March 2006, the latter was granted the exclusive right and authority for operating, maintaining, developing and managing of the Indira Gandhi International Airport, New Delhi ("IGI Airport'').

Since DIAL took over the operations of the IGI Airport from AAI, it was empowered under the provisions of the agreement to exercise AAI’s statutory powers with regard to levy of demurrages charges at the IGI Airport.

The Central Board of Excise and Customs (CBEC) notified the cargo regulations, including the impugned regulation. A concession agreement was signed between DIAL and Celebi Delhi Cargo Terminal Management India Pvt. Ltd. (Celebi) enabling it to operate, maintain and manage the cargo terminal at IGI Airport. Thereafter, the Commissioner of Customs started issuing directions to DIAL and Celibi, to waive demurrage charges in accordance with the impugned regulation. Since these directions were not complied with, the Customs Officer issued a show cause notice to DIAL and Celebi as to why the regulations weren’t complied with and why an action should not be initiated against them.

The court said though DIAL’s function in relation to operating the IGI airport was governed by the AAI Act, but the obligations of the customs cargo service provider is governed by the cargo regulations. The introduction of sub-section (2) to Section 141 of the Customs Act empowers the customs authorities to direct the custodian of goods to waive the demurrage charges on goods as a result of which DIAL’s contention that the CBEC exceeded the power delegated to it by the Customs Act failed.

DIAL also argued that the regulation violated Article 14, as it has no nexus with the object sought to be achieve, and Article 19 (1)(g) inasmuch as it places a blanket ban on the charge of demurrage by the custodian of goods in case of detention, confiscation or seizure of goods by customs.

Regarding Article 14, the court said cargo regulations were enacted for the purpose of prescribing the responsibilities of persons engaged in the handling of imported or export goods in a customs area, and the impugned regulation is as such an obligation cast upon the persons involved in the said activities. And as for violating Article 19(1)(g), the court said:

“Investigation being an integral part of working of the Customs Department, the consignments detained by the customs authorities or other investigating agencies, cannot be cleared during investigation particularly if such cases involve trade policy, human safety and security, security of state etc. It is with these considerations that the impugned regulation was included in the Cargo Regulations and it should be viewed in the light of the object with which it has been framed.”

The bench of Justice S Ravindra Bhat and Justice Deepa Sharma, thus, concurred that the regulation does not violate any constitutional provision.

DIAL’s further argument was that in the event of directions under the regulations, compliance would result in commercial unviability, because its autonomy to charge fully or in part might eventually result in losses. The court in this regard observed that the Central Government is vested with the power under section 40 of the AAI Act to issue directions and said: 

“In the event, DIAL is of the view that customs authorities’ directions to it to not charge demurrage are unwarranted, it can seek guidance and directions in that regard, from the Central Government.”

Thus, after careful examination and discussion, the challenged to the regulation was dismissed.

Read the Judgment here.

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